The president’s trip to Africa this week includes stops in Kenya and Ethiopia. Obama’s visit — the first by a sitting US president to Ethiopia — may help accelerate growth of the budding garment and textile industry there.
Already, soaring production costs in China and tragedies such as the deadly collapse of the Rana Plaza factory in Bangladesh have apparel industry executives seeking out alternative production sites. Africa is high on their list.
Ethiopia holds the most promise for developing garment production in Africa, factory owners and brands say. Factors favoring Ethiopia include a new government that appears committed to growth and inexpensive electric power. The country also has plenty of young, cheap, and teachable workers.
Also, the agriculture-based country of 94 million is working to increase cotton production. This will enable garment makers to go from fiber to factory in a single place.
While landlocked Ethiopia doesn’t have a port, some apparel companies remain interested. The government is building a railway to the port in neighboring Djibouti.
The Obama administration is seeking to extend US trade legislation passed to boost prosperity in Africa. The African Growth and Opportunity Act (AGOA), enacted in 2000, encourages African countries to open their economies and build free markets. It has been successful in encouraging small and medium-sized businesses to increase their exports.
Since AGOA went into effect in 2001, Ethiopia’s exports — consisting mainly of apparel, textiles, leather goods, and horticulture — have increased by 150%.
Foreign investment began flowing into Ethiopia about four or five years ago, spurred by industry heavyweights including VF Corp. (owner of the Lee and Wrangler brands) and Swedish clothing retailer H&M. Both companies brought their Asian suppliers to Africa to explore investing in countries such as Kenya and Ethiopia.
Development has apparently convinced some American brands to place orders. US imports of apparel and accessories from Ethiopia increased by about 25% between January and May of this year versus the same period in 2014. This outpaced the 8% import growth from neighboring Kenya.
Industry Impact: To meet demand in the West for inexpensive clothing while maintaining profit margins, apparel brands may want to look to factories in Africa, especially Ethiopia, for cheap labor and other efficiencies.
Alexandra Biesada shops everyday, whether she wants to or not, and pines for the days when it was strictly a recreational activity. She has covered the retail beat for Hoover’s since 2001.